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03/07/2013 09:36 am ETUpdated
May 07, 2013

Getting the Record Straight on Health Care Reform

By Steve Westly and Jeffrey Pfeffer

Many people criticize the Affordable Care Act (sometimes called Obamacare) with misleading and factually incorrect implications. But distortions, repeated often enough, too often come to be taken as truth. It is important, therefore, to be clear on the many virtues of ACA and its effects on employees.

One criticism is that employers will adjust employees' hours to avoid having to purchase health insurance, thereby harming workers by reducing their total incomes (because of the reduced hours). Since hourly workers generally earn less, the argument is that it is the most economically vulnerable who will be most at risk. This argument fails to acknowledge that the practice of employers adjusting hours to avoid paying benefits is already incredibly widespread, particularly in retail, and is already harming the most vulnerable workers in the labor force. Employers for decades have adjusted employee work hours so they can avoid offering not just benefits such as health insurance but also vacations and paid time off -- any benefits that have minimum hours for eligibility associated with them. The health care law will not change this pre-existing behavior. However, ACA will allow people currently not receiving health benefits to get coverage through the new health insurance exchanges, with premium tax credits to make such insurance more affordable.

The second fallacy is often called "the perfect is the enemy of the good." There is no question that employers will try to game the Obamacare rules. Employers currently try to game overtime rules and regulations defining who is and is not an employee to avoid paying payroll taxes; there have been numerous high-profile settlements (think Microsoft among others) penalizing companies for incorrectly classifying employees as independent contractors. While Obamacare is not perfect, providing health coverage to more people is desirable, both from the moral standpoint of stopping the 50,000 needless deaths that occur each year because people do not have access to health care, and from an economic standpoint of increasing workplace productivity and job mobility. Waiting for a law that ensures employers won't engage in any attempts to game the system will paralyze us from ever achieving any progress.

A third oft-repeated fallacy is the "benefits destroy jobs" argument or its variant, benefits reduce wages. This was the argument used by the restaurant association to try and stop Healthy San Francisco, a city ordinance requiring that employers either provide health insurance to their employees or else give their workers an hourly pay subsidy so they can buy their own coverage. Healthy San Francisco was to be the end of business in the city, in particular the restaurant business. Ha! Try getting a dinner reservation in a city with an expanding workforce and with technology and media companies moving into the city, not out.

The most pernicious fallacy about ACA pertains to "costs." As OECD and World Health Organization data amply demonstrate, health care costs too much in the U.S. and delivers health outcomes below those of many other developed nations. The problem is partly one of getting care too late--in the emergency room rather than when disease is less advanced and more easily treated. That's why initial evaluations of Healthy San Francisco show a reduction in emergency room visits when people are able to see primary care doctors. But Obamacare also puts in place several paths to improve quality, efficiency, and outcomes -- reducing hospital re-admissions, health care associated infections, and fraud and waste, among others. And, by expanding health care coverage, Obamacare will eliminate the billions of dollars of lost productivity from an unhealthy workforce who cannot access quality care. That just makes economic sense to us.

The current system of delayed care, sporadic follow-up, and cost shifting not only harms people's well-being, it is economically inefficient as well.

Jeffrey Pfeffer is the Thomas D. Dee II Professor of Organizational Behavior at the Graduate School of Business, Stanford University.

Steve Westly served as California State Controller from 2003-2007. He is Managing Partner of The Westly Group, a clean technology venture capital firm.